Dealing with and filing tax returns is a time consuming but essential part of your business. And while it may be tempting to complete and file your returns yourself, it is vitally important to understand the potential benefits of hiring an accountant and the concrete risks if you don’t.
So, do you actually need an accountant to carry out your self-assessment and what are the benefits (and risks) of trying it yourself?
What is self-assessment?
Used by HMRC, a self-assessment return captures key financial information about your business to calculate your tax requirements. For employees, this will automatically be extracted from their salary through PAYE (pay as you earn).
A self-assessment tax return must be calculated and sent to HMRC if-
– You were self-employed or fell under the category of a ‘sole trader’, earning more than £1k
– You acted as a partner in a business.
Sending your tax return can also be predicated by other actions you took across the tax year. These include but are not limited to earning money from property rental, securing commission and/or tips through your work, obtaining interest from savings and investments.
Self-assessment requires you to keep statements and receipts throughout the year and complete an online return before the due date. Once this is submitted and judged as accurate, HMRC will work out what tax you must pay by the deadline of Jan 31st of the following tax year.
Do you need an accountant?
You don’t need an accountant to complete a self-assessment tax return, but it is important to understand what you are getting yourself into if you don’t. Self-assessment can be complex and, without professional guidance, it’s very easy to make mistakes that lead to the under-payment or even over-payment of your tax responsibility.
Recent changes to filing practice have made completing and submitting your tax return easier than before – with all applications made online and accessible through your dedicated online account. However, the requirements and complexity of the process have not been reduced and if you struggle with finance or completing your forms, the process can be confusing and stressful – especially as it concerns your personal finances and livelihood.
The likelihood of leaving stressful tasks to the last minute or vastly underestimating the effort required to complete a tax return makes working with an accountant a valuable asset when deadlines approach. Choosing the right accountant can help you understand the completion of your returns and ensure that you get the most benefit from your work.
How can an accountant help?
A helpful aid to professionals and individuals from all backgrounds, hiring an accountant carries a number of significant benefits. These include but are not limited to-
Correct Calculations: Working with a professional accountant can allow you to eliminate human error from the process and ensure that all your figures are complete and accurate. Even genuine mistakes can result in significant fines from HMRC and re-calculating or correcting your tax can result in additional expenditure of time and effort that could have been easily avoided.
Avoiding Issues: In addition to reducing mistakes, an accountant allows you to ensure that every box is ticked, and hoop jumped through when it comes to filing. This helps eliminate complications that may plague you later in the year, producing stress and requiring you to take time from your professional or private life to resolve.
Ruling out Fines: Hiring an accountant will ensure that you are able to avoid fines or other penalties that can accompany late payments or incorrect submissions. HMRC enforces two types of fine, failure to submit and failing to pay on time. Selecting an accountant will help avoid these fines and ensure that no nasty surprises will creep up in the months ahead.
Accurate Payments: Hiring an accountant to complete your return will ensure that your payments are accurate for your band and that your payments are not needlessly excessive. A trained accountant will help you pay the correct amount of tax and use a range of options to draw the most benefit from expenses and other elements that you are allowed.
Time-Saving: One of the most obvious benefits of hiring an accountant is the time that you will save. While securing an accountant may seem an expense that you could do without, their ability to eliminate the unnecessary payment of tax can often pay for itself. An experienced accountant can also complete the return in a fraction of the time an individual may take, giving you the most invaluable gift of all – more time to spend on growing your business.
Who can benefit from self-assessment?
No matter whether you’re a successful business owner or a freelancer, any individual can make use of the services of an accountant. In addition to their practical expertise, their professional knowledge can be an asset when it comes to resolving issues with your personal finances or setting yourself up to save for the years ahead.
Hiring an accountant is a powerful asset for many. This can help streamline the work of a busy freelancer, help a mid-sized company deal with tomorrow’s issues today, and allow successful business owners to optimise their plans and retire with confidence.
And if you’re in doubt about their value, count out how many hours you last spent completing your forms and compare that to your hourly working wage. The difference may just shock you…
If you want to learn more about self-assessment and the potential benefits that an accountant carries, our team at One Click Accountant is here to help. With many years’ of accountancy experience, we work with you to unpack your financial needs and put in place a dedicated plan to help drive reporting efficiency throughout all corners of your business.